16/09/2016 12:51 PM AEST

Jobs, Growth And The Budget Fight For Our National Accounts

We're close to beating world record economic growth, but are the figures what they seem?

The Federal Government's $6 billion Omnibus budget savings bill passed the senate in the dead of night on Thursday, with Labor agreeing to 20 of the 24 of the government's "budget repair" measures. Debate had been raging for weeks over the Federal Government's savings measures, amid reports of a rear guard action within Labor to oppose a proposed $1.3 billion cut to the clean energy supplement, which would deliver a cut to Newstart recipients.

Ahead of the passage of the measures, Treasurer Scott Morrison said the challenge for the parliament -- in which the government hold a majority of just one seat -- was to pass the government savings measures he said will get the national budget back into balance.

What is driving our economy and has driven our economy over the past 25 years is household consumption

A year ago -- when Prime Minister Malcolm Turnbull unseated Tony Abbott as PM -- government expenditure as a share of GDP looked like it was going back over 26 percent, Morrison said (it's now at 25.9 percent).

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Australian Prime Minister Malcolm Turnbull will mark a year in the top job on Wednesday, as political pressure over budget repair and same sex marriage continue to mount in a razor thin parliament.

Critics say the government had delivered tax cuts for big business and the wealth, while cutting spending to Australia's most vulnerable.

Passage of the omnibus bill comes amid news the national economy is growing at a solid clip, while domestic demand and inflation remain soft. The unemployment rate fell to 5.6 percent in August, its lowest since October 2013 and near a three-year low.

But as St George Economics points out, the decline came courtesy of 'discouraged' workers; the participation rate fell to 64.7 percent, its lowest since June 2015.

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Australian Labor Party leader Bill Shorten has promised to "look constructively" at the government's omnibus savings bill, amid reports of a "rear-guard action" to oppose some measures inside the ALP.

The latest political power and employment data play comes a week after Australia hit an economic milestone, with the nation closing in on the world record for the longest period of economic growth.

The Australian economy grew at its fastest rate in four years, recording 3.3 percent year on year growth and 0.5 percent in the three months to June following a strong showing from government consumption (up 1.9 percent) and government investment (up 15.5 percent).

But the rosy headline figures produced by the Australian Bureau of Statistics has prompted warnings to policy makers and the public not to become complacent about the national economy.

The growth in government consumption was explained by Morrison as being due to the listing of new drugs on the Pharmaceutical Benefits Scheme (PBS), the procurement of Chinook military helicopters and other infrastructure investment.

Pring Samrang / Reuters
"We continue to fight for every inch of growth in a very difficult and challenging global economy," Mr Morrison said when the results were released.

Morrison said the nation's success was a tribute to "every Australian who has gone out there, gone to work, got a job, and is running or has started a business".

On Monday -- just before parliament began -- he dismissed analysis that making substantial budget cuts would undermine the growth in government spending that helped the national accounts along.

"The full year's story does not have new public final demand being the dominant contributor to growth over the last 12 months of the the things that primarily drove growth over the last 12 months were net export and household expenditure," he said.

"Now there was particular factors in the last quarter's national accounts, whether it was the Hep C drugs or Chinooks that factored into those figures. What is driving our economy and has driven our economy over the past 25 years is household consumption."

How healthy are Australia's (almost) record breaking national accounts?

In Australia, a recession is defined as two consecutive quarters of economic contraction.

The latest figures marked 25 years -- or 100 quarters -- since Australia last recorded two straight quarters of contraction, a recession locked in the nation's memory after Prime Minister Paul Keating in 1991 declared it was "the recession we had to have".

While the year-on-year growth figure is considered to be quite strong, some of the other numbers making up Australia's economy are making observers uneasy.

Australia added almost 72,000 net new jobs, mostly part time, in 2016, a figure that obscures the loss of 65,000 full-time jobs. The slowdown also coincides with depressed wage growth in the year to June, which in turn is softening consumer spending.

Private investment is also on the wane.

"The bottom line is, the private sector would have us in recession," Newcastle University Chair of Economics Bill Mitchell told The Huffington Post Australia.

"Private investment -- which is about 16, 17 percent of GDP, that's negative and strongly negative and it's not going to recover anytime soon."

Mitchell argues that while the rear view nature of the National Accounts data makes it difficult to predict trends, he believes Australia entered into entered into a "precarious period notwithstanding the 3.1 per cent annual growth rate (June to June)".

"With domestic wages growth flat and household indebtedness at record levels, I don't suspect a huge contribution (to GDP) from household consumption in the coming quarters," he wrote on his blog.

"Private investment is forecast to contract further.

"So if the government sector persists in implementing its planned spending cuts then recession looms for the Australian economy."

Most of the growth public investment spending came from State and Local governments transport infrastructure projects (think Westconnex in NSW, Melbourne Metro in Victoria).

The ABS data showed private sector investment for the June quarter was down 8.3 percent compared with the June quarter in 2015. Private investment fell 3.4 percent in the quarter, following a decline of 1.2 percent in the March-quarter 2016.

A quarter of a century later, and the outgoing Reserve Bank Governor -- Glenn Stevens -- is warning of complacency from political leaders over the health of the economy.

Tim Wimborne / Reuters
Reserve Bank of Australia (RBA) Governor Glenn Stevens will step down after 10 years in the top job at the bank next week.

Stevens has been at the top, or near the top, of the Reserve Bank for 20 of the past 25 years.

"There is, I guess, some possibility that the celebrated 25 years of growth leaves us, collectively, as a – and I wouldn't just single out political leadership here, leaves the community, perhaps, without realising it, operating on the assumption that this is all a bit of a game," he told the Australian Financial Review.

"It's a bit like a sporting event, the waxing and waning, interesting to watch, but in the end it's just a game. Actually, it isn't."

Treasury Secretary John Fraser said government spending must be cut to arrest growing debt, but convincing people remained a problem.

"We feel prosperous, it's great country, we go to sporting events and see everybody happy and you think 'What's the problem?'"

"There is a problem which is why we keep banging the drum about it, and it's a problem also that is growing," he said during a speech in London.